6 October 2017

Federation of German Industry warns companies of “very hard Brexit”

The Federation of German Industry (BDI) yesterday issued a warning to German companies in the UK to prepare for a “very hard Brexit.”  BDI CEO Joachim Lang has said, “The unbundling from one of Germany’s closest allies is inevitably linked to high economic cost,” adding it was “not just the Damocles Sword of insecurity” hanging above German companies, but also “the danger of massive devaluations.” He continued, “From the first day after a disorderly departure [of the UK from the EU], companies would be confronted with enormous uncertainties in foreign trade amongst themselves, with other states, concerning market access and regulation.” Lang argued that while the UK will take the main impact of Brexit, “Germany will be hit as well.” He also accused the British government of “talking a lot” and “lacking a clear concept” in its Brexit strategy, adding, “The Conservative Party conference showed how divided the party is with regards to Brexit. This makes further negotiations so difficult.” On the issue of a transition period, Lang argued that, “The transition period needs to be as long as it takes to put a new trade agreement between the UK and the EU into force.”

Separately, according to The Daily Telegraph, Britain will refuse to tell the EU how much it is prepared to pay as part of any Brexit financial settlement in the next round of negotiations. A Whitehall source is quoted as saying, “There won’t be any political movement from the British side on the bill until the EU broadens its package to discuss transition and the future relationship.” However, The Daily Telegraph quotes an EU diplomat saying, “The longer the unravelling continues in London, the less likely it is that [EU’s chief Brexit negotiator] Michel Barnier will ask for a relaxing of his mandate so he can talk about transition.”

Source: Tagesspiegel Spiegel The Daily Telegraph

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Brexit transition deal must be in place by Christmas, says Bank of England official

The Bank of England’s head of supervision and said a Brexit transition deal must be reached by the end of the year to provide assurance to financial firms as they prepare for life after Brexit. Sam Woods, chief executive officer of the Prudential Regulation Authority, said, “If we get to Christmas and the negotiations have not reached any agreement on this topic, diminishing marginal returns will kick in…Firms would start discounting the likelihood of a transition in the central case of their planning.” Woods said that the first phase of contingency plans on jobs would be “relatively modest,” with most of the initial work on setting up new operations in the EU and receiving regulatory approval, adding, “Contingency planning is a sliding scale of increased commitment, investment and momentum through time. It much more prudent and prosaic than hovering over the relocate button or rushing to the exit door.”

Prime Minister Theresa May has pledged to secure a two-year transition period after Brexit in March 2019, but Woods pointed out that the EU’s position “is not yet clear.”

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Portugal’s Foreign Minister: No prospect of ‘sufficient progress’ in Brexit talks

In an interview with Politico, Portugal’s Foreign Minister Augusto Santos Silva said Portugal wants a post-Brexit economic relationship with the UK that is as “dense and rich” as it is now, but he sees no prospect for the Brexit negotiations moving on to discussing the future relationship later this month due to a lack of progress. He praised Prime Minister Theresa May’s Florence speech as a step forward, but said, “The cabinet in London does not appear as a united body in what relates to Brexit.” He suggested that the talks may move to the next phase when EU leaders meet in December. He also argued that Portugal is concerned about the “withdrawal of the Anglo-Saxon world.”

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Financial Times: Downgraded OBR forecast to wipe out Chancellor's £26bn Brexit fund by two-thirds

The Office for Budget Responsibility (OBR) will publish a new analysis next Tuesday that is expected to downgrade its prediction for economic growth, arguing that it has consistently over-estimated UK productivity over the past seven years. An internal Treasury analysis suggests the revision could wipe out two-thirds of the £26 billion in headroom that the Chancellor created last year to support the economy through Brexit. However, both the OBR and the Chancellor are expected to highlight that the new forecast does not imply a revised assessment of the impact of Brexit on the UK economy.

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Former Conservative party chairman mounting leadership challenge against Theresa May

Former Conservative party chairman Grant Shapps has confirmed he is helping to lead an attempt by Conservative MPs to force a leadership election. He said Prime Minister Theresa May had “unfortunately fought an election which didn’t work out. We have not really managed to see [a] relaunch, there has been a sort of lack of discipline in the Cabinet and the party conference this week. I just think that a growing number of my colleagues realise the solution isn’t to bury our heads in the sand and just hope things will get better.” He suggested that five former cabinet members were among those “planning to go to see Theresa May,” and his discussions had included “some members of the present Cabinet.” A total of 48 MPs would be needed to trigger a leadership contest.

Separately, Home Secretary Amber Rudd writes in a piece for The Daily Telegraph, “[Theresa May] should stay…We are at a turning point for the nation. Trust that it is us who will take Britain in the right direction.” Environment Secretary Michael Gove has also said, “[Theresa May] has been an excellent prime minister and I hope she carries on as prime minister for years to come.” He added, “I don’t know of a single Cabinet minister who [wants to see May go]…the truth is that the entirety of the Cabinet, the truth is that the overwhelming majority of people, want the Prime Minister to concentrate on doing the job which 14 million people elected her to do earlier this year.”

UK Supreme Court President calls for clarity on “taking into account” ECJ rulings post-Brexit

The new President of the UK Supreme Court, Lady Hale, has called for “as much clarity as possible” from Parliament on how far judges should “take into account” future rulings made by the European Court of Justice. She added, “We hope that the European Union (Withdrawal) Bill will tell us what we should be doing … saying how much we should be taking into account [judgments from the ECJ]. We would like to be told because then we will get on and do it.”

Separately, the Institute for Government have released a report on post-Brexit dispute resolution. They argue that the UK should either sign up to the European Free Trade Association (EFTA) court or come up with new proposals for a dispute resolution system.

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Henry Newman: Government is united in its Brexit plan

Open Europe’s Henry Newman has written a piece for ConservativeHome arguing that “ministers and the wider party are actually largely united over the Government’s Brexit plan.” He writes that there is “some disagreement… Yet neither [Hammond nor Johnson] is challenging the overall policy. These disagreements, and others, over the current stated policy are relatively slight.”

Despite this, he argues that “There’s much less clarity or agreement around the next phase of Brexit” and the “fundamental question” of whether the UK will seek a Canda style trade deal with the EU, or a Norway-style arrangement, “was dodged in the Florence speech.” This question could lead to a “Cabinet row that has the power to force resignations”, and the “Government’s next moves will be crucial”.

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